More About Credit Scores. How Do You Compare?

Last week’s blog focused on why keeping watch on your credit score is important. This week we want to share with you some more facts and data about credit scores and consumer debt.

Recently the credit reporting service Experian released its annual “State of Credit: 2017” report which was summarized by Bob Sullivan in his blog of January 11 (read the report here).

We were pleased that, in general, the report was consistent with data we have reported in our past blogs. As Sullivan says: “2017 was a year of contradictions for American consumers…” The economy is strengthening, unemployment is low, but debt is increasing and delinquencies are rising.

For the most part the consumer is pretty healthy. The average credit score hit 675, the highest since 2012.

Even better “For the first time, there are more Americans with very high scores (Super Prime) than very low scores (Deep Subprime). For example, in 2017, 22.3% of Americans had Vantage Scores between 781-850 – a 6% increase versus 2016, and an improvement compared to five years ago when only 19.8% were in that range. Last year, 21.2% were below 600 – versus 22.6% in 2016 and 26.9% in 2012.”

Not everyone is at either end. The report provides a “Credit Snapshot” of the average consumer in the U.S.:

Average VantageScore 675

Average Number of Credit Cards 1

Average Balance on Credit Cards $6,354

Average Number of Retail Cards 5

Average Balance on Retail Cards $1,841

Average Mortgage Debt $201,811

Average Non-Mortgage Debt $24,706

Sullivan does point out that trying to create an ‘average’ consumer can be misleading. He uses the example of mortgage debt where a debt of $201,811 in the Midwest may seem high, but on either coast may seem like a bargain.

Geographic location also plays a part in good or not so good credit scores. Remarkably, given our Midwest footprint, we are in a bit of a ‘sweet spot’ with most of the states we serve in the top ten of those having the highest VantageScores in the nation. Minnesota, for example, has the best credit score of any state in the country (709), with Minneapolis topping the list of the cities with the highest credit scores (709). Wisconsin is not far behind (696), and the cities of Wausau (706) and Green Bay (705) are right behind Minneapolis.

Does age play a part in a credit score? It seems it does, at least if scores are broken down by generational segments. Sullivan points out that younger generations have fewer credit accounts, and therefore less credit history. Yet, as he points out, “…there’s a dramatic difference between the youngest, Generation Z (born after 1996), and the oldest, the so-called Silent generation (born before 1946). Gen Z’s average score is 634, while “Silents” are almost 100 points higher, at 729.” If you are a “Boomer” or older you seem to be in pretty good standing as that is the point average credit scores exceed 700. Here is a comparison by generation segment*:

Silent GenerationBaby BoomersGen XGen YGen Z

Average VantageScore 729 703 658 638 634

Average Number of Credit Cards 3.0 3.5 3.2 2.5 1.4

Average Balance on Credit Cards $4,613 $7,550 $7,750 $4,315 $2,047

Average Number of Retail Cards 2.3 2.7 2.6 2.0 1.5

Average Balance on Retail Cards $1,354 $1,931 $2,122 $1,626 $770

Average Mortgage Debt $156,705 $188,828 $231,774 $198,302 $160,411

Average Non-Mortgage Debt $15,161 $27,513 $30,334 $22,784 $6,963

*Data provided by Experian “State of Credit: 2017”

So, is this all healthy? Experian points out warning signs. Debt is at record highs. Student loans, auto debt and other non-mortgage debt is up and in particular for young borrowers. As Sullivan points out this leaves little room for error as they begin their adult lives.

Are there things to do that can help improve scores for 2018? Sullivan suggests three things in particular:

Try to get your credit card utilization rate below 30%.

Use your tax cut to pay down your debt.

Be careful when taking out new credit or applying for new credit cards. More debt can impact a credit score negatively.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners. Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 12 years.